Gazprom Working on Pipeline Gas Supplies to China

Source: 10/30/2012, Location: Asia

The Board of Directors took into account the information regarding the progress with pipeline gas supplies to China and other Asia-Pacific countries. It was noted during the meeting that a fresh impetus was given to the negotiations with China within the frameworks of the APEC Summit in Vladivostok.

At present, gas supplies from Russia in the amount of 68 billion cubic meters are being discussed with China, in the amount of 10 billion cubic meters – with South Korea, negotiations are ongoing with Japan. Meanwhile, Sakhalin LNG is being exported to the Asia-Pacific countries.

As a result of creating a new Russian gas export center within the Eastern Gas Program, gas supplies from Russia to the Asia-Pacific countries can compare with the Russian gas export to Europe or even exceed it.

The Management Committee was tasked to continue the abovementioned efforts.

Commercial negotiations on the terms and conditions of natural gas supplies to China are being held since late 2005. The state-owned petroleum company CNPC participates in the negotiations on behalf of the Chinese party.

In October 2009 Gazprom and CNPC inked the Framework Agreement on major terms and conditions for natural gas supply from Russia to China. In December 2009 the Basic Major Terms of Gas Supply from Russia to China were signed. The parties fundamentally agreed on gas supplies along two routes: the western route – 30 billion cubic meters (Altai project), and the eastern route – 38 billion cubic meters. Within the Altai project implementation, Gazprom Group has effectuated considerable preparatory work for the creation of new gas transmission capacities.

The investment rationale for the project was developed and the survey along the pipeline route was performed. The Altai gas pipeline construction will start only when a gas purchase and sale agreement is concluded with China.

In gas supplies via the eastern route, the Russian side gives priority to development of the LNG export and the ingress from Vladivostok to the Asia-Pacific markets with its LNG. At the same time, the LNG supplies development from Vladivostok does not exclude the possibility of gas laterals construction for the Yakutia gas supplies to China from the perspective Yakutia – Khabarovsk – Vladivostok gas trunkline.

In the last round of negotiations, the parties agreed to start discussing the possibility of pipeline gas supplies via the eastern route while maintaining the LNG priority.

Another important project of pipeline gas supplies in the region is Russian gas export to the Republic of Korea via the Democratic People's Republic of Korea. The intergovernmental agreement between the two countries authorizes Gazprom and Kogas to supply natural gas from Russia to the Republic of Korea. In 2009 Gazprom and Kogas signed the Agreement to jointly explore the natural gas supply project. In pursuance of the Agreement, a final report was issued in 2010. The report studied options for natural gas supply from the terminal point of the Sakhalin – Khabarovsk – Vladivostok gas transmission system to Korea.

On September 15, 2011 Gazprom and the Oil Ministry of the Democratic People's Republic of Korea signed the Memorandum of Understanding stipulating cooperation on the project for pipeline gas pipeline supplies from Russia to the Korean Peninsula. On the same day, after the project received support from the Democratic People's Republic of Korea, Gazprom and Kogas inked the Roadmap on natural gas supplies from the Russian Federation to the Republic of Korea. The Roadmap is a plan of top-priority actions needed for the project implementation.

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